Levine on Wall Street: The Sheep of Wall Street
Wall Street isn't that wolfy.
The great disappointment about working on Wall Street, especially in investment banking, is that you spend virtually none of your working hours engaged in the outrageous debauchery that was promised to you in books and movies. It's a lot of regional-airline flights to meet clients in drab conference rooms, mostly, as William Cohan rightly points out. (At more junior levels it's a lot of hanging out at terrible Murray Hill bars, as Kevin Roose rightly points out.)
There's not enough Brent crude.
Here is the head of oil trading company Vitol calling for a broader crude-oil price benchmark than the current Brent index, because I guess there's not enough Brent. I've talked before about the enjoyable un-abstractness of oil benchmarks: You sit in your comfy chair and open your newspaper and see "Brent crude is at $110" or whatever, but there are guys on boats fighting North Sea storms to bring you that number. But now there's not enough oil on their boats.
More criminal Libor charges.
There are more criminal Libor charges coming in England. I guess if sending dumb e-mails about Libor manipulation is a crime, then, yeah, there are gonna be more charges.
Here is Deal Professor Steven Davidoff comparing Jos. A. Bank's purchase of Eddie Bauer to a famous bit of M&A chicanery done by Time Inc. in 1989, where Time chose to acquire Warner Communications for cash to avoid a hostile offer from Paramount. (Later Time Warner did other M&A things too.) Jos. A. Bank's cash deal for Eddie Bauer to avoid a hostile offer from Men's Wearhouse is not dissimilar, though somewhat more shareholder-friendly in that it includes an out if a better deal comes along. And here is Dealpolitiker Ronald Barusch examining Men's Wearhouse's options; unsurprisingly, one of them is "sue."
Private equity is growing up.
Exercise for the reader: Draw a set of supply and demand curves that explain why private equity funds charge "an average of 1.9% of the fund’s total value in annual management fees, the lowest figure since records began in 2005," while private equity funds also are sitting on stonking amounts of cash. What is being supplied? What is being demanded?
"What Drives the Shadow Banking System in the Short and Long Run?"
According to this Dallas Fed researcher, in the long run regulation seems to drive the shadow-banking share of the lending market, which I guess can't entirely be a surprise? "In the short-run, the shadow share rose when deposit interest rate ceilings were binding, the economic outlook improved, or risk premia declined, and fell when event risks disrupted financial markets."
Watch out for the regulatory par calls.
I'm not going to try to convince you that this is a funny story but it's a funny story. Credit Suisse has some Tier 1 instruments outstanding that were trading at about 107 until last week. The problem is that they're callable at 100 if they no longer count as Tier 1 capital. The further problem is that they don't. So "the company is potentially seeking to execute the regulatory par call embedded in the security. This option states that if the securities no longer count as Tier 1 capital in their entirety due to a change in regulation, then the bank can redeem them." So now they're trading at 102, which is still more than 100, I guess on the theory that the company wouldn't be so cruel as to surprise the market by doing the thing that it said it would do when it issued the security. Why were you buying this thing at 107 if it's immediately callable at 100?
Ryan Avent's view on our robot future/present is that "because we rely on market wages to allocate purchasing power we have resisted technology-driven reductions in employment, and because we have resisted that decline in work we have trapped ourselves in a world of self-limiting productivity growth," which is a view that I find congenial in part because it provides theoretical underpinnings for my laziness.
To contact the writer of this article: Matt Levine at firstname.lastname@example.org.
To contact the editor responsible for this article: Tobin Harshaw at email@example.com.